UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
Proxy Statement Pursuant
to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant
þ
Filed by a Party
other than the Registrant o
Check the appropriate box:
o | Preliminary Proxy Statement |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Pursuant to ss.240.14a-12 |
HMS HOLDINGS CORP. |
(Name of Registrant as Specified In Its Charter) |
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box): | ||
þ | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
(1) | Title of each class of securities to which transaction applies: | |
(2) | Aggregate number of securities to which transaction applies: | |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
(4) | Proposed maximum aggregate value of transaction: | |
(5) | Total fee paid: | |
o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |
(1) | Amount Previously Paid: | |
(2) | Form, Schedule or Registration Statement No.: | |
(3) | Filing Party: | |
(4) | Date Filed: |
HMS HOLDINGS
CORP.
401 Park Avenue South
New York, New York 10016
Notice of Annual Meeting of Shareholders to be held June 3, 2005
The
Annual Meeting of Shareholders (the Meeting) of HMS Holdings Corp. will be held at our
offices located at 401 Park Avenue South, New York, New York, on June 3, 2005 at
10:00 a.m., Eastern Daylight Time, for the following purposes:
Only
shareholders of record at the close of business on April 15, 2005 will be entitled
to receive notice of and to vote at the Meeting and at any adjournments of the
Meeting.
Shareholders are cordially invited to attend the Meeting in person. Whether or not you expect to attend, we urge you to read the accompanying Proxy Statement and then complete, sign, date, and return the enclosed form of proxy in the accompanying postage-prepaid envelope. It is important that your shares be represented at the Meeting by virtue of your executed proxies should you be unable to attend the Meeting in person. Your promptness in responding will assist us to prepare for the Meeting and to avoid the cost of a follow-up mailing. If you receive more than one form of proxy because you own shares registered in different names or at different addresses, each form of proxy should be completed and returned.
Sincerely, | |
William F.
Miller III Chairman of the Board of Directors |
May 4, 2005
HMS HOLDINGS
CORP.
401 Park Avenue South
New York, New York 10016
PROXY STATEMENT
Annual Meeting of Shareholders To Be Held June 3, 2005
GENERAL
INFORMATION
This
Proxy Statement is furnished to shareholders of HMS Holdings Corp., a New York
corporation, in connection with the solicitation by our Board of Directors of proxies
for use at our Annual Meeting of Shareholders. The Meeting is scheduled to be held on
Friday, June 3, 2005, at 10:00 a.m., Eastern Daylight Time, at our offices located at
401 Park Avenue South, New York, New York. We anticipate that this Proxy Statement
and the enclosed form of proxy will be mailed to shareholders on or about May 4,
2005.
At
the Meeting, shareholders will be asked to vote upon: (1) the election of five
directors; (2) the ratification of the selection of independent certified public
accountants for fiscal year 2005; and (3) such other business as may properly come
before the Meeting and at any adjournments thereof.
Voting
Rights and Votes Required
The
close of business on April 15, 2005 has been fixed as the Record Date for the
determination of shareholders entitled to receive notice of and to vote at the
Meeting. As of the close of business on such date, we had outstanding and entitled to
vote 19,823,117 shares of Common Stock, par value $0.01 per share. Because many
shareholders cannot attend the Meeting in person, it is necessary that a large number
be represented by proxy. Shareholders have a choice of voting over the Internet, by
using a toll-free number or by completing a proxy card and mailing it in the
postage-paid envelope provided. Shareholders should refer to their proxy card or the
information forwarded by their bank, broker or other holder of record to see which
voting options are available to them. Shareholders should be aware that if they vote
over the Internet, they may incur costs such as telephone and Internet access
charges for which they will be responsible. The Internet and telephone voting
facilities for shareholders will close at 11:59 p.m. Eastern Daylight Time on June
2, 2005. Other deadlines may apply to shareholders whose stock is held of record by
a bank, a broker or other holder of record.
A
majority of the shares of Common Stock entitled to vote at the Meeting must be
represented in person or by proxy at the Meeting in order to constitute a quorum
for the transaction of business. The record holder of each share of Common Stock
entitled to vote at the Meeting will have one vote for each share so held.
Directors
are elected by a plurality of the votes cast. Shareholders may not cumulate their
votes. The five candidates receiving the highest number of votes will be elected. In
1
tabulating the
votes, votes withheld in connection with the election of one or more nominees and
broker nonvotes will be disregarded and will have no effect on the outcome of the
vote.
The
affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Meeting in person or by proxy and entitled to vote at the meeting
will be required to ratify the selection of our independent certified public
accountants. Abstentions and broker nonvotes will count for quorum purposes.
Abstentions and broker nonvotes will be disregarded and will have no effect on the
outcome of the proposal to ratify the selection of independent certified public
accountants.
Voting of
Proxies
If
the accompanying proxy is properly executed and returned, the shares represented by
the proxy will be voted at the Meeting as specified in the proxy. If no instructions
are specified, the shares represented by any properly executed proxy will be voted
FOR the election of the nominees listed below under Election of Directors and
FOR the ratification of the selection of independent certified public accountants.
Revocation
of Proxies
Any
proxy given pursuant to this solicitation may be revoked by a shareholder at any
time before it is exercised by: (i) written notice to our Secretary, (ii) timely
notice of a properly executed proxy bearing a later date delivered to us, or (iii)
voting in person at the Meeting.
Solicitation
of Proxies
We
will bear the cost of this solicitation, including amounts paid to banks, brokers,
and other record owners to reimburse them for their expenses in forwarding
solicitation materials regarding the Meeting to beneficial owners of Common Stock.
The solicitation will be by mail, with the materials being forwarded to shareholders
of record and certain other beneficial owners of Common Stock by our officers and
other regular employees (at no additional compensation). Such officers and
employees may also solicit proxies from shareholders by personal contact, by
telephone, or by other means if necessary in order to assure sufficient representation
at the Meeting.
Mellon
Investor Services LLC has been retained to receive and tabulate proxies and to provide
representatives to act as inspectors of election for the Meeting.
2
MATTERS SUBJECT TO SHAREHOLDER VOTE
1. ELECTION
OF DIRECTORS
Pursuant
to our by-laws, our Board of Directors is currently divided into two classes, with
one class standing for election each year for two-year terms. The terms of four
directors will expire at the Meeting and one additional director is nominated. New
York law requires that all classes of directors be as nearly equal in number as
possible. Accordingly, the terms of four of the five nominees listed below, if
elected at the Meeting, will expire at the 2007 annual meeting, and the term of one
of the nominees listed below, if elected at the Meeting, will expire at the 2006
annual meeting. The terms of the other current directors listed below will expire at
the 2006 annual meeting.
The
four persons designated by the Board of Directors as nominees for election as
directors with terms expiring at the 2007 annual meeting are William F. Miller III,
William W. Neal, Ellen A. Rudnick, and Richard H. Stowe. The one person
designated by the Board of Directors as a nominee for election as a director with a term
expiring at the 2006 annual meeting is Robert M. Holster.
Unless
a contrary direction is indicated, it is intended that proxies received will be voted
for the election as directors of the five nominees, with one nominee to serve for a
one-year term expiring at the 2006 annual meeting and four nominees to serve for
two-year terms expiring at the 2007 annual meeting, and in each case until their
successors are elected and qualified. In the event any nominee for director
declines or is unable to serve, the proxies may be voted for a substitute nominee
selected by the Board of Directors. The Board of Directors expects that each
nominee named in the following table will be available for election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
Name | Position with the Company or Principal Occupation | Served
as Director from |
||
Nominees for directors for two-year terms ending in 2007: | ||||
William F. Miller III | Our Chairman. | 2000 | ||
William W. Neal | Private Investor. | 1989 | ||
Ellen A. Rudnick | Executive Director, Michael P. Polsky Entrepreneurship Center, University of Chicago Graduate School of Business. | 1997 | ||
Richard H. Stowe | Private Investor. Senior Advisor to Capital Counsel LLC, an asset management firm. | 1989 | ||
Nominee for director for one-year term ending in 2006: | ||||
Robert M. Holster | Our Chief Executive Officer. |
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Name | Position with the Company or Principal Occupation | Served
as Director from |
||
Directors continuing in office until 2006: | ||||
Randolph G. Brown | Private Investor. Formerly Chairman and Chief Executive Officer of One Inc., a surgery center management company. | 1998 | ||
James T. Kelly | Private Investor. Formerly Chairman of the Board and Chief Executive Officer of Lincare Holdings, Inc., a provider of oxygen and respiratory therapy services to patients in the home. | 2001 | ||
Galen D. Powers | Senior Founder of Powers, Pyles, Sutter & Verville, P.C., a healthcare law firm; Director of MedCath, which owns and operates acute care hospitals that specialize in cardiovascular disease. | 1992 |
Executive
Officers and Directors
Certain
information is set forth below with respect to our executive officers and directors as
of April 15, 2005:
Name | Position |
William F. Miller III | Chairman and Chief Executive Officer |
Robert M. Holster | President and Chief Operating Officer |
William C. Lucia | President, Health Management Systems, Inc. |
Thomas G. Archbold | Chief Financial Officer |
Randolph G. Brown (1) | Director |
James T. Kelly (1) (2) | Director |
William W. Neal (2) | Director |
Galen D. Powers (3) | Director |
Ellen A. Rudnick (3) | Director |
Richard H. Stowe (1) (2) (3) | Director |
As of April 15,
2005, Board Committee membership was as follows:
(1) | Member
of the Audit Committee |
(2) | Member
of the Compensation Committee |
(3) | Member
of the Compliance Committee |
4
William F.
Miller III, 55, Chairman, joined us in October of 2000 as Chief Executive
Officer and director. On December 14, 2000, Mr. Miller was elected Chairman of
the Board. From 1983 through 1999, Mr. Miller served as President and Chief Operating
Officer of EmCare Holdings, Inc., a leading national healthcare services firm
focused on the provision of emergency physician medical services. From 1980 through
1983, Mr. Miller served as Administrator/Chief Operating Officer of Vail Mountain
Medical. Prior to 1980, Mr. Miller served in various management positions as CFO,
and CEO of various investor owned hospital facilities. Mr. Miller is currently a
director of Lincare Holdings, Inc. and AMN Healthcare, Inc.
Robert M.
Holster, 58, re-joined us in April of 2001 as President and Chief Operating
Officer, and was appointed our Chief Executive Officer effective May 1, 2005. From
1993 through 1998, Mr. Holster served as President and Chief Executive Officer of HHL
Financial Services, Inc., at the time one of the nations largest healthcare
accounts receivable management companies. From 1998 to 2000, Mr. Holster served
as Trustee of the HHL Trust. Previously, Mr. Holster served as our Executive Vice
President from 1982 through 1993 and as one of our directors from 1989 through 1996.
Prior to 1982, Mr. Holster served in a number of executive positions including
Chief Financial Officer of Macmillan, Inc. and Controller of Pfizer Laboratories, a
division of Pfizer, Inc. Mr. Holster is currently a director of Hi-Tech
Pharmacal, Inc. and Varsity Group Inc.
William C.
Lucia, 47, appointed President and Chief Operating Officer effective May 1, 2005,
joined us in 1996. Mr. Lucia has held several positions with us including: President,
Health Management Systems, Inc. subsidiary, 2002 to 2005; President, Payor Services
Division, 2001 to 2002; Vice President and General Manager, Payor Services Division,
2000 to 2001; Vice President, Business Office Services, 1999 to 2000; Chief Operating
Officer of Quality Medical Adjudication, Incorporated (QMA) (formerly a
wholly-owned subsidiary of ours) and Vice President of West Coast Operations, 1998
to 1999; Vice President and General Manager of QMA, 1997 to 1998; and Director of
Information Systems for QMA, 1996 to 1997. Prior to joining us, Mr. Lucia served in
various executive positions including Senior Vice President, Operations and Chief
Information Officer for Celtic Life Insurance Company and Senior Vice President,
Insurance Operations for North American Company for Life and Health Insurance. Mr.
Lucia is a Fellow, Life Management Institute (LOMA).
Thomas G.
Archbold, 45, was appointed our Chief Financial Officer on January 12, 2005.
Previously, Mr. Archbold served as Interim Chief Financial Officer since April
2004 and had joined us in August 2002 as Vice President of Finance and
Controller. Prior to joining us, from 1999 through 2001, he was Chief Financial
Officer of Langer Inc., a publicly traded healthcare device manufacturer, and
served as the Controller of several manufacturing companies. He was in the audit
practice of Ernst & Young LLP for more than nine years, including four years as a
Senior Manager.
Randolph G.
Brown, 62, has served as a director since 1998. Mr. Brown is a private investor who
formerly served as Chairman and Chief Executive Officer of One-Inc., a developer and
manager of refractive and cataract surgery centers in New York, from August of 1999
until he sold the business in October 2001. Previously, Mr. Brown had been an
independent business consultant since November 1996, principally as a venture partner
with Morgenthaler Venture
5
Partners. From
July 1987 through October 1996, Mr. Brown served in various senior executive positions,
including Chairman, President and Chief Executive Officer for Medaphis
Corporation, a provider of accounts receivable management services to
hospital-affiliated physicians and hospitals. From 1978 to 1987, Mr. Brown served
in various management positions with Humana Inc., at that time a provider of
integrated healthcare delivery services.
James T. Kelly,
58, has served as a director since December 2001. Mr. Kelly is a private investor
who formerly served as the Chief Executive Officer of Lincare Holdings, Inc., one
of the nations largest providers of oxygen and other respiratory therapy
services to patients in the home, from 1986 through 1996, and served as Chairman of the
Board from 1994 through 2000. Prior to becoming Lincare's Chief Executive Officer,
Mr. Kelly served in a number of positions within the Mining and Metals Division of
Union Carbide Corporation. Mr. Kelly is currently a director of American Dental
Partners, Inc. and several private companies.
William W.
Neal, 73, has served as a director since 1989. Mr. Neal is a private investor. Mr.
Neal formerly served as Managing Principal of Piedmont Venture Partners from
1996 to 2001. From 1989 to 1996, he served as Chief Executive Officer of Broadway
and Seymour, a company that provided software and computer systems to the banking
industry. From 1985 through July 1989, he was a general partner of Welsh, Carson,
Anderson & Stowe (WCAS), an investment firm. Mr. Neal was Senior Vice President,
Marketing of Automated Data Processing, Inc. (ADP) from 1984 to 1985 and a Group
President of ADP from 1978 to 1984. He served as a director of ADP from 1982 to
1985.
Galen D.
Powers, 68, has served as a director since 1992. Mr. Powers is the Senior Founder of
Powers, Pyles, Sutter & Verville P.C., a Washington, D.C. law firm specializing
in healthcare and hospital law, which he founded in 1983. Mr. Powers was the first
chief counsel of the federal Health Care Financing Administration (now Centers for
Medicare and Medicaid Services) and has served as a director and the President of the
American Health Lawyers Association. Mr. Powers is currently a director of MedCath,
Inc., which owns and operates acute care hospitals that specialize in
cardiovascular disease, and a number of private companies in the healthcare field.
Ellen A.
Rudnick, 54, has served as a director since 1997. Ms. Rudnick is an Executive
Director and Clinical Professor of the Michael P. Polsky Entrepreneurship Center,
University of Chicago Graduate School of Business. She also served as Chairman of
CEO Advisors, Inc., a privately held consulting firm through 2003. From 1993 until
1999, Ms. Rudnick served as Chairman of Pacific Biometrics, Inc., a publicly held
healthcare biodiagnostics company and its predecessor, Bioquant. From 1990 to 1992,
she was President and Chief Executive Officer of Healthcare Knowledge Resources
(HKR), a privately held healthcare information technology corporation, and
subsequently served as President of HCIA, Inc. (HCIA) following the acquisition of
HKR by HCIA. From 1975 to 1990, Ms. Rudnick served in various positions at Baxter
Health Care Corporation, including Corporate Vice President and President of its
Management Services Division. She also serves on the Boards of Liberty Mutual
Insurance Company and Patterson Companies.
6
Richard H.
Stowe, 61, has served as a director since 1989. Mr. Stowe is a private investor and
Senior Advisor to Capital Counsel LLC, an asset management firm. From 1979 until 1998,
Mr. Stowe was a general partner of WCAS. Prior to 1979, he was a Vice President in
the venture capital and corporate finance groups of New Court Securities
Corporation (now Rothschild, Inc.). Mr. Stowe is also a director of MedQuist, Inc.,
a provider of medical record transcription services.
Directors Fees
We
pay non-employee directors $2,500 quarterly and $1,500 for each special Board of
Directors or committee meeting that they attend, and reimburse them for expenses
incurred in attending those meetings.
Committees
and Meetings of the Board of Directors
The
Board of Directors is composed of a majority of independent directors (as
independence is defined in the rules of The NASDAQ National Market). The Board of
Directors held five meetings during fiscal year 2004. Each director attended at
least 75% of the aggregate of the total number of meetings of (a) the Board of
Directors, and (b) the committees on which the director served.
We
do not have a policy with regard to directors attendance at annual meetings. One
director attended our 2004 Annual Meeting.
The
committees of the Board of Directors consist of an Audit Committee, a Compensation
Committee and a Compliance Committee. Prior to March 3, 2004, the Audit and Compliance
Committees were joined as one committee. The joined committee held one meeting in
fiscal year 2004 before the committee was split. The charters of all Board
Committees, the Companys Code of Ethics and Code of Conduct for Designated
Senior Financial Managers are available on our website at www.hmsholdings.com.
Audit
Committee. The Audit Committee currently consists of Messrs. Brown (Chairman),
Kelly and Stowe. The Board has determined that all members of the Audit Committee
are independent directors under the rules of The NASDAQ National Market and that
each of them is able to read and understand fundamental financial statements. The
Board has determined that Mr. Brown qualifies as an audit committee
financial expert as defined by the rules of the Securities and Exchange
Commission (the SEC) and that he is independent of management, as such term is
defined in item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934.
The
purpose of the Audit Committee is to oversee our accounting and financial reporting
processes and audits of our financial statements. The responsibilities of the
Audit Committee include appointing the independent accountants to conduct the
annual audit of our accounts, reviewing the scope and results of the independent
audits, reviewing and evaluating internal accounting policies, and approving all
professional services to be provided to us by our
7
independent
accountants. The Audit Committee also approves the compensation of our independent
accountants. The Audit Committee held five meetings during fiscal year 2004.
Compensation
Committee. The Compensation Committee reviews and recommends the compensation
and bonuses of our executives. The Compensation Committee also administers our
1999 Long-Term Incentive Stock Plan and 1995 Non-Employee Director Stock Option
Plan. The Compensation Committee is comprised of Messrs. Stowe (Chairman), Kelly
and Neal. The Compensation Committee held one meeting during fiscal year 2004. The
Board has determined that all members of the Compensation Committee are independent
directors under the rules of The NASDAQ National Market.
Compliance
Committee. The Compliance Committee consists of Mr. Powers (Chairman), Ms. Rudnick
and Mr. Stowe. The purpose of the Compliance Committee is to oversee the operation
of the Corporations Corporate Compliance Program providing for adherence to
health care related laws, regulations, and guidance. The Compliance Committee held
three meetings during fiscal year 2004.
Director
Nominations
The
Board of Directors does not have a standing nominating committee or committee
performing similar functions. The Board of Directors has determined that it was
appropriate not to have a nominating committee because of the relatively small size
of the Board of Directors and the fact that the Board already has three committees
comprised solely of independent directors. The entire Board of Directors, upon
the recommendation of a majority of the independent directors (as independence is
defined in the rules of The NASDAQ National Market), selects the nominees for
election to the Board.
Criteria
for Nomination to the Board. In evaluating director candidates, regardless of
the source of the nomination, the Board of Directors will consider the composition of
the Board as a whole, the requisite characteristics (including independence,
diversity, age, skills and experience) of each candidate, and the performance and
continued tenure of incumbent Board members. The Board of Directors has not
established specific minimum qualifications in this connection. No formal policy
has been established for the consideration of candidates recommended by
shareholders, given the historically small number of shareholder recommendations
received in the past. The Board of Directors does not believe the lack of such a
policy would materially affect its willingness to consider a suitable candidate
recommended by shareholders.
Process
for Identifying and Evaluating Nominees. The independent directors initiate the
process for identifying and evaluating nominees to the Board of Directors by
identifying a slate of candidates who meet the criteria for selection as nominees
and have the specific qualities or skills being sought based on input from all
members of the Board of Directors and, if appropriate, a third-party search
firm. The independent directors evaluate these candidates by reviewing their
biographical information and qualifications and checking the candidates references.
Qualified nominees are interviewed by at least one independent director.
Appropriate
8
candidates
meet with all the independent directors, and using the input from such interviews
and the information obtained by them, the independent directors evaluate which of the
prospective candidates is qualified to serve as a director and whether they should
recommend to the Board of Directors that the Board nominate, or elect to fill a
vacancy, these final prospective candidates. Candidates recommended by the
independent directors are presented to the Board for selection as nominees to be
presented for the approval of the shareholders or for election to fill a vacancy.
Special
Committee
In
late January 2003, we received a subpoena issued under the Health Insurance
Portability and Accountability Act of 1996 from the United States Attorneys
Office for the Southern District of New York. The subpoena sought the production of
certain documents from January 1982 to present relating to medical reimbursement
claims submitted by us to Medicare, Medicaid, and other federal healthcare
programs, particularly on behalf of a significant client of Accordis Inc.
On
January 30, 2003, the Board of Directors formed a Special Committee, consisting of
Messrs. Stowe (Chairman), Kelly and Brown to supervise our response to the
Department of Justice, supervise our defense during the course of the
investigation and to conduct such investigations, with counsel, as the committee may
deem necessary.
In
April 2004, we reached an agreement with the United States Attorneys
Office for the Southern District of New York to settle certain matters raised in the
course of the United States Attorneys investigation. In August 2004, we
entered into a Stipulation and Order of Settlement and Dismissal Agreement and paid the
United States government $1.35 million to settle this matter. At the same time, the
qui tam lawsuit against us that was the basis of the governments investigation
was dismissed. As part of the settlement agreement, we entered into a Compliance
Agreement with the Office of the Inspector General for the Department of Health and
Human Services. The Compliance Agreement covers a three-year period and principally
requires us to continue our existing compliance program and to make annual filings
certifying compliance.
We
recorded a charge of $1.7 million in the quarter ended March 31, 2004 to reflect the
settlement and related legal and other expenses. During the quarter ended September
30, 2004, all amounts due under the settlement agreement were paid.
Code of
Ethics
We
have adopted a Code of Business Conduct and Ethics that applies to our employees,
officers (including our principal executive officer and principal financial officer)
and directors. The Code of Business Conduct and Ethics is posted on our website
at www.hmsholdings.com and can also be obtained free of charge by sending a request
to our Secretary at 401 Park Avenue South, New York, New York 10016. Any changes
to or waivers under the Code of Business Conduct and Ethics as it relates to our
principal executive officer, principal financial officer, controller or persons
performing similar functions must be approved by our Board of Directors
9
and will be
disclosed in a current Report on Form 8-K within five business days of the change or
waiver.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Pursuant
to Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act) and the
rules issued thereunder, our executive officers and directors are required to file
with the SEC and the National Association of Securities Dealers, Inc. reports of
ownership and changes in ownership of Common Stock. Copies of such reports are
required to be furnished to us. Based solely on review of the copies of such reports
furnished to us, or written representations that no other reports were required, we
believe that during fiscal year 2004, all of our executive officers and directors
complied with the requirements of Section 16(a), with one exception. Thomas G.
Archbold was appointed Interim Chief Financial Officer on April 22, 2004; his
initial Form 3 was filed late.
Additional
information regarding compensation of executive officers and directors is provided on
pages 14 through 23 of this Proxy Statement.
10
2.
RATIFICATION OF THE SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The
Board of Directors, in accordance with the recommendation of the Audit Committee,
has selected, subject to ratification by shareholders, KPMG LLP, independent
certified public accountants, to audit our consolidated financial statements for
fiscal year 2005. KPMG LLP has audited our consolidated financial statements and the
financial statements of our predecessor since 1981.
We
expect representatives of KPMG LLP to attend the Meeting, to be available to
respond to appropriate questions from shareholders, and to have the opportunity to
make a statement if so desired.
Fees of
Independent Certified Public Accountants
Consistent
with the Audit Committees responsibility for engaging our independent auditors,
all audit and permitted non-audit services are required to be approved by the Audit
Committee and all services were approved by the Audit Committee prior to the
services being performed by the auditors.
During
fiscal years 2004 and 2003, fees in connection with services rendered by KPMG LLP,
the Companys independent auditors, were as follows:
2004 | 2003 | |||||||
Audit fees | $ | 541,100 | $ | 213,000 | ||||
Audit related fees | 31,500 | 20,500 | ||||||
Tax fees | | | ||||||
All other fees | | | ||||||
Total fees | $ | 572,600 | $ | 233,500 | ||||
Audit
fees are those fees for professional services rendered in connection with the
audits of our consolidated financial statements for the years ended December 31,
2004 and 2003 and the review of our quarterly condensed consolidated financial
statements on Form 10-Q. Audit related fees consisted of services rendered in
connection with employee benefit plan audits.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE SELECTION OF KPMG
LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR FISCAL YEAR 2005.
11
ADDITIONAL INFORMATION
Stock
Ownership
The
following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 31, 2005 by (a) each person known by us to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock, (b)
each executive officer identified in the Summary Compensation Table below, (c) each
director and nominee for director, and (d) all executive officers and directors
as a group. Except as otherwise noted, the named shareholder had sole voting and
investment power with respect to such securities.
Name | Amount | Percentage |
AMVESCAP
PLC (a) 11 Devonshire Square London EC2M 4YR England |
2,886,200 | 14.6 |
Babson
Capital Management LLC (b) One Memorial Drive Cambridge, MA 02142-1300 |
1,496,582 | 7.6 |
Wells
Fargo & Company (c) 420 Montgomery Street San Francisco, CA 94104 |
1,361,446 | 6.9 |
Dimensional
Fund Advisors Inc. (d) 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401 |
1,169,185 | 5.9 |
William F. Miller III (e) | 1,620,762 | 7.8 |
Robert M. Holster (f) | 1,059,977 | 5.1 |
William C. Lucia (g) | 312,528 | 1.6 |
Thomas G. Archbold (h) | 46,732 | * |
Randolph G. Brown (i) | 161,000 | * |
James T. Kelly (j) | 290,000 | 1.4 |
William W. Neal (k) | 159,670 | * |
Galen D. Powers (l) | 127,685 | * |
Ellen A. Rudnick (m) | 121,500 | * |
Richard H. Stowe (n) | 183,187 | * |
All executive officers and directors as a group (10 persons)(o) | 4,083,041 | 17.8 |
* denotes
percentage of ownership is less than 1%.
(a) The number
of shares of Common Stock beneficially owned is based upon information on a
Schedule 13G filed by AMVESCAP PLC with the SEC as of December 31, 2004. Such shares
are held by the following entities in the respective amounts listed: AIM Advisors,
Inc. 2,418,000; AIM Capital Management, Inc. 231,200; INVESCO Institutional (N.A.),
Inc. 237,000.
12
(b) The number
of shares of Common Stock beneficially owned is based upon information on a
Schedule 13G filed by Babson Capital Management LLC with the SEC as of December 31,
2004.
(c) The number
of shares of Common Stock beneficially owned is based upon information on a
Schedule 13G/A filed by Wells Fargo & Company with the SEC as of December 31, 2004.
(d) According
to its Schedule 13G/A for the year ended December 31, 2004, Dimensional Fund
Advisors Inc. is a registered investment advisor which furnishes investment advice to
four investment companies registered under the Investment Company Act of 1940, and
serves as investment manager to certain other commingled group trusts and separate
accounts. The shares of Common Stock are owned by these funds.
(e) Includes
outstanding options to purchase 1,016,667 shares (75,000 of which are held in trust by
members of the family of Mr. Miller, as to which Mr. Miller disclaims beneficial
ownership) of Common Stock that are currently exercisable or will become exercisable
before May 30, 2005. Also includes 6,000 shares of Common Stock owned by members of
the family of Mr. Miller, as to which Mr. Miller disclaims beneficial ownership.
(f) Includes
outstanding options to purchase 966,667 shares of Common Stock that are currently
exercisable or will become exercisable before May 30, 2005. Also includes 35,996
shares of Common Stock owned by members of the family of Mr. Holster, as to which
Mr. Holster disclaims beneficial ownership.
(g) Includes
outstanding options to purchase 305,834 shares of Common Stock that are currently
exercisable or will become exercisable before May 30, 2005.
(h) Includes
outstanding options to purchase 38,335 shares of Common Stock that are currently
exercisable or will become exercisable before May 30, 2005.
(i) Includes
outstanding options to purchase 161,000 shares of Common Stock that are currently
exercisable or will become exercisable before May 30, 2005.
(j) Includes
outstanding options to purchase 270,000 shares of Common Stock that are currently
exercisable or will become exercisable before May 30, 2005. Also includes 20,000
shares of Common Stock owned by members of the family of Mr. Kelly, as to which Mr.
Kelly disclaims beneficial ownership.
(k) Includes
55,979 shares of Common Stock owned by members of the family of Mr. Neal, as to
which Mr. Neal disclaims beneficial ownership. Also includes outstanding options
to purchase 99,250 shares of Common Stock that are currently exercisable or will
become exercisable before May 30, 2005, 85,000 of which are held by a family member,
as to which Mr. Neal disclaims beneficial ownership.
(l) Includes
237 shares of Common Stock owned by members of the family of Mr. Powers, as to
which Mr. Powers disclaims beneficial ownership. Also includes outstanding
options to purchase
13
122,250 shares
of Common Stock that are currently exercisable or will become exercisable before May 30,
2005.
(m) Includes
outstanding options to purchase 118,500 shares of Common Stock that are currently
exercisable or will become exercisable before May 30, 2005.
(n) Includes
2,250 shares of Common Stock owned by members of the family of Mr. Stowe, as to
which Mr. Stowe disclaims beneficial ownership. Also includes outstanding
options to purchase 133,625 shares of Common Stock that are currently exercisable or
will become exercisable before May 30, 2005.
(o) Includes
outstanding options to purchase 3,232,128 shares of Common Stock that are currently
exercisable or will become exercisable before May 30, 2005.
Executive
Compensation
Summary
Compensation Table
The
following table sets forth the cash and non-cash compensation for the three years
ended December 31, 2004 awarded to or earned by our Chief Executive Officer and by each
of our other three most highly compensated executive officers. We only have three
other executive officers.
Annual Compensation |
Long-Term Compensation Awards Securities Underlying Options |
|||||||||||||||||||
Name and Principal Position | Fiscal Year |
Salary($) | Bonus($) | Other
Annual Compensation($) |
All Other Compensation($) (a) |
|||||||||||||||
William F. Miller III (b) | 2004 | $ | 400,000 | $ | 178,400 | $ | | | $ | 6,000 | ||||||||||
Chairman and | 2003 | 400,000 | 200,000 | | 100,000 | 6,000 | ||||||||||||||
Chief Executive Officer | 2002 | 400,000 | 545,000 | (b) | | 125,000 | 6,000 | |||||||||||||
Robert M. Holster (c) | 2004 | 325,000 | 144,387 | | | 6,000 | ||||||||||||||
President and | 2003 | 325,000 | 162,500 | | 100,000 | 6,000 | ||||||||||||||
Chief Operating Officer | 2002 | 325,000 | 162,500 | | 125,000 | 6,000 | ||||||||||||||
William C. Lucia (d) | 2004 | 225,000 | 124,000 | | | 6,000 | ||||||||||||||
President, Health | 2003 | 225,000 | 132,500 | | 50,000 | 6,000 | ||||||||||||||
Management Systems, Inc. | 2002 | 225,000 | 128,250 | | 100,000 | 4,875 | ||||||||||||||
Thomas G. Archbold (e) | 2004 | 172,519 | 67,100 | | 25,000 | 1,612 | ||||||||||||||
Senior Vice President and | ||||||||||||||||||||
Chief Financial Officer |
(a) | Includes
matching contributions under our 401(k) Plan. |
14
(b) | Mr.
Miller joined us as Chief Executive Officer and a director as of October 2, 2000, and
is currently Chairman of the Board. Mr. Millers entire bonus for 2002 and 2001,
after deduction for related payroll taxes, was applied to pay the first and
second principal installments and accrued interest on his indebtedness to the
Company arising from the purchase of shares of our Common Stock in January 2001. See
Employment Agreements. |
(c) | Mr.
Holster joined us as President and Chief Operating Officer during 2001 and was
appointed Chief Executive Officer effective May 1, 2005. |
(d) | Mr.
Lucia joined us in 1996 and was appointed President and Chief Operating Officer
effective May 1, 2005. |
(e) | Mr.
Archbold joined us in 2002, was appointed Interim Chief Financial Officer on April 22,
2004 and was named Chief Financial Officer on January 12, 2005. |
15
Employment
Agreements
William F.
Miller III Chairman of the Board of Directors
On
November 4, 2003, we amended our employment agreement with Mr. Miller, which was
originally entered into on October 2, 2000 (the Miller Agreement). The Miller
Agreement provides for his employment through October 2, 2006 (the Employment Term)
(subject to earlier termination in certain circumstances as described below), at a
base salary of $400,000 per year. Mr. Miller is eligible to receive bonus compensation
from us in respect of each fiscal year (or portion thereof) during the Employment
Term, in each case as may be determined by our Board of Directors in its sole discretion
on the basis of performance-based or such other criteria as may be established from
time to time by our Board of Directors.
On
January 10, 2001, as a condition of Mr. Millers employment, our former
Accelerated Claims Processing, Inc. subsidiary, a Delaware corporation, provided
the financing for Mr. Miller to purchase directly from us 550,000 shares of Common
Stock. The loan, in the principal amount of $721,785, bore interest at the rate of
6.5% per annum, and was payable annually in two equal installments commencing
January 2002. The loan was a full recourse loan and was secured by the purchased
shares and the shares issuable upon the exercise of stock options. Bonuses
otherwise payable to Mr. Miller were applied to pay the first and second installments
of principal and interest on Mr. Millers note to us in January 2002 and 2003,
respectively. The loan is now fully repaid.
Also
in connection with his employment, on January 10, 2001, the Compensation
Committee granted Mr. Miller options to purchase 750,000 shares of Common Stock at
an exercise price of $1.31 per share (the then current market price), with
options covering 100,000 shares vesting on the first anniversary of the grant, and
options covering the remaining 650,000 shares vesting thereafter in eight equal
quarterly installments. These options were not granted pursuant to our 1999 Long-Term
Incentive Stock Plan.
If
we terminate Mr. Millers employment without cause or if his
employment ceases within 45 days of a change in control of us (both as
defined in the Miller Agreement), Mr. Miller will be entitled to a continuation of
salary for 24 months and group medical insurance for 36 months following
termination of employment. In addition, certain of his unvested options accelerate
and certain restrictions on his Common Stock are eliminated in the case of a change in
control.
Robert M.
Holster Chief Executive Officer
On
February 11, 2004, we amended our employment agreement with Mr. Holster, which
was originally entered into on March 31, 2001 (the Holster Agreement). The
Holster Agreement provides for his employment through April 2, 2007 (the Holster
Employment Term) (subject to earlier termination in certain circumstances as
described below), at a base salary of $325,000 per year. Effective May 1, 2005,
with his promotion to Chief Executive Officer, Mr. Holsters base salary was
increased to $400,000 per year. Mr. Holster is eligible to receive bonus compensation
16
from us in
respect of each fiscal year (or portion thereof) during the Holster Employment
Term, in each case as may be determined by our Board of Directors in its sole discretion
on the basis of performance-based or such other criteria as may be established from
time to time by our Board of Directors.
Also
in connection with his employment, on March 30, 2001, the Compensation
Committee granted Mr. Holster options to purchase 700,000 shares of Common Stock at
an exercise price of $1.19 per share (the then current market price), with
options covering 100,000 shares vesting on the first anniversary of the grant, and
options covering the remaining 600,000 shares vesting thereafter in eight equal
quarterly installments. These options were not granted pursuant to our 1999 Long-Term
Incentive Stock Plan.
If
we terminate Mr. Holsters employment without cause or if his
employment ceases within 45 days of a change in control of us (both as defined in the
Holster Agreement), Mr. Holster will be entitled to a continuation of salary and
group medical insurance for 24 months following termination of employment. In
addition, certain of his unvested options accelerate in the case of a change in
control.
William C.
Lucia President and Chief Operating Officer
On
January 1, 2003, Mr. Lucia entered into an employment agreement (the Lucia Agreement)
with us. The Lucia Agreement provides for his employment through January 1, 2006 (the
Lucia Employment Term) (subject to earlier termination in certain circumstances
as described below), at a base salary of $225,000 per year. Effective May 1, 2005,
with his promotion to President and Chief Operating Officer, Mr. Lucias base
salary was increased to $300,000 per year. Mr. Lucia is eligible to receive bonus
compensation from us in respect of each fiscal year (or portion thereof) during the
Lucia Employment Term in an amount of 50% of base salary, in each case as may be
determined by our Board of Directors in its sole discretion on the basis of meeting
Health Management Systems business objectives established from time to time by our
Board of Directors.
Also
in connection with his employment, Mr. Lucia is eligible for consideration by
our Board of Directors for awards of stock options under any stock option plan that may
be established by the Company for its and its subsidiaries key employees. The
amount, if any, of shares for which options may be granted to Mr. Lucia is in the sole
discretion of the Compensation Committee of our Board of Directors.
If
we terminate Mr. Lucias employment without cause, as defined in the
Lucia Agreement, Mr. Lucia will be eligible to receive a continuation of salary and
group medical insurance for 12 months following termination of employment.
17
Stock Options
Our
1999 Long-Term Incentive Stock Plan allows grants of stock options and other rights
relating to our Common Stock. In general, whether exercising stock options is
profitable depends on the relationship between the Common Stock's market price and the
options exercise price, as well as on the optionees investment
decisions. Options that are "in the money" on a given date can become
"out of the money" if prices change on the stock market. For these
reasons, we believe that placing a current value on outstanding options is highly
speculative and may not represent the true benefit, if any, that may be realized
by the optionee. The following two tables give more information on stock options.
Options
Granted in the Last Year
The
following table sets forth selected option grant information for the year ended
December 31, 2004 with respect to options awarded to our Chief Executive Officer
and each of our three other most highly compensated executive officers.
Type
of Option Granted |
Number
of Options Granted |
% of Total Options Granted to Employees (a) |
Exercise Price Per Share |
Expiration Date |
Value at Assumed Annual Rates of Stock Price Appreciations for Option Term (b) |
||||||||||||||||||
Name | 5% | 10% | |||||||||||||||||||||
Thomas G. Archbold | NQ | 3,986 | 8.0 | % | $ | 6.42 | 4/15/2014 | $ | 84,844 | $ | 215,012 | ||||||||||||
ISO | 21,014 | 42.0 | % | 6.42 | 4/15/2014 | 16,093 | 40,784 | ||||||||||||||||
25,000 | 50.0 | % | 100,937 | 255,796 |
(a) | Represents
individual option grant as a percentage of total options issued in the year ended
December 31, 2004 |
(b) | The
hypothetical potential appreciation shown in these columns reflects the required
calculations at compounded annual rates of 5% and 10% set by the SEC, and therefore is
not intended to represent either historical appreciation or anticipated future price
appreciation of the Common Stock. |
18
Stock
Options Exercised in the Last Year and Related Period-ended Stock Option Values
The
following table sets forth selected stock option exercise information for the
year ended December 31, 2004 and the number and value of stock options as of December
31, 2004 relating to our Chief Executive Officer and each of our other three most
highly compensated executive officers.
Shares Acquired on Exercise |
Value Realized |
Number of Unexercised Options at Period-End |
Value of Unexercised Options at Period-End (a) |
|||||||||||||||||
|
|
|||||||||||||||||||
Name | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||
William F. Miller III | | $ | | 1,016,667 | 33,333 | $ | 7,360,585 | $ | 202,665 | |||||||||||
Robert M. Holster | | | 966,667 | 33,333 | 7,060,085 | 202,665 | ||||||||||||||
William C. Lucia | 50,008 | 260,000 | 305,834 | 16,666 | 1,812,771 | 101,329 | ||||||||||||||
Thomas G. Archbold | 26,666 | 101,787 | 30,002 | 33,332 | 148,693 | 142,228 |
(a) | Value
of unexercised in the money options is determined by multiplying the number
of shares subject to such options by the difference between the exercise price per share
and $9.00, the closing price per share of the Common Stock on The NASDAQ National Market
on December 31, 2004. |
19
Equity
Compensation Plan Information
The
following table summarizes the total number of outstanding options and shares
available for other future issuances of options under all of our equity compensation
plans as of December 31, 2004.
Plan Category |
Number of securities to be issued upon exercise of outstanding warrants, options and rights (a) |
Weighted-average exercise price of outstanding warrants, options and rights (b) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c) (2) |
||||||||
Equity Compensation Plans | |||||||||||
approved by Shareholders (1) | 3,831,009 | $3.32 | 1,061,566 | ||||||||
Equity Compensation Plans not | |||||||||||
approved by Shareholders (3) | 1,450,000 | $1.25 | | ||||||||
Total | 5,281,009 | $2.75 | 1,061,566 | ||||||||
(1) | This
includes options to purchase shares outstanding: (i) under the 1999 Long-Term Incentive
Stock Plan, (ii) the 1995 Non-Employee Director Stock Option Plan, and (iii) 250,000
options approved by shareholders and granted to a director in June 2002. |
(2) | Of
these shares: (i) 988,066 shares remain available for future issuance under our 1999
Long-Term Incentive Stock Plan, and (ii) 73,500 shares remain available for issuance
under the 1995 Non-Employee Director Stock Option Plan. |
(3) | Options
issued under plans not approved by shareholders include (i) 750,000 options granted in
January 2001 to our Chairman and Chief Executive Officer in connection with his joining
us, and (ii) 700,000 options granted in March 2001 to our President and Chief Operating
Officer in connection with his joining us. |
401(k) Plan
Effective
November 1, 1997, we established a 401(k) Plan to replace our terminated profit
sharing plan. The 401(k) Plan permits an employee to contribute a portion of the
employees compensation, subject to certain limitations. At our discretion, we
may make annual contributions to the 401(k) Plan for the benefit of participating
employees. For the fiscal years ended December 31, 2004, 2003 and 2002, 401(k) Plan
expense was $609,000, $467,000 and $451,000, respectively.
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee is comprised of Richard H. Stowe, William W. Neal, and James T.
Kelly, each of whom is a non-employee director of the Company. No member of this
Committee was at any time during fiscal year 2004 or at any other time an officer or
employee of ours. None of our executive officers served on the Compensation
Committee of another entity or on any other committee of the Board of Directors of
another entity performing similar functions during our last fiscal year.
20
Notwithstanding
contrary statements set forth in any of our previous filings under the Securities
Act of 1933 (the Securities Act) or the Exchange Act that might incorporate future
filings, including this Proxy Statement, the Compensation Committee report, the
Audit Committee Report and the performance graph set forth below shall not be
incorporated by reference into such future filings.
Compensation
Committee Report on Executive Compensation
This
report provides an explanation of the philosophy underlying our executive
compensation program and details on how decisions were implemented during fiscal year
2004 regarding the compensation paid to our executive officers.
Our
mission is to be a significant provider of quality services in the markets we serve.
To support this and other strategic objectives as approved by the Board of Directors
and to provide adequate returns to shareholders, we must compete for, attract,
develop, motivate, and retain top quality executive talent at the corporate office and
operating business units during periods of both favorable and unfavorable business
conditions.
Our
executive compensation program is a critical management tool in achieving this goal.
Pay for performance is the underlying philosophy for our executive
compensation program. Consistent with this philosophy, the program has been
carefully conceived and is independently administered by the Compensation Committee
of the Board of Directors, which is comprised entirely of non-employee directors.
The program is designed to link executive pay to corporate performance, including share
price, recognizing that there is not always a direct correlation in the short-term
between executive performance and share price.
The
program is designed and administered to:
In
seeking to link executive pay to corporate performance, the Compensation
Committee believes that the most appropriate measure of corporate performance is
the increase in long-term shareholder value, which involves improving such
quantitative performance measures as revenue, net income, cash flow, operating
margins, earnings per share, and return on shareholders equity. The
Compensation Committee may also consider qualitative corporate and individual
factors which it believes bear on increasing our long-term value to our
shareholders. These include: (i) revenue growth; (ii) increases in operating
income; (iii) the attainment of specific financial goals; (iv) the development of
competitive advantages; (v) the ability to deal effectively with the growing
complexity of our businesses; (vi) success in developing business strategies,
managing costs, and improving the quality of our services as well as customer
satisfaction; (vii) execution
21
of
divestitures, business unit closures, acquisitions, and strategic partnerships,
(viii) implementation of operating efficiencies, and (ix) the general performance of
individual job responsibilities.
Our
executive compensation program consists of: (i) a base salary; (ii) an annual bonus;
and (iii) a long-term incentive represented by stock options.
Compensation
of Executive Officers
Salary.
In determining the amount of compensation to be paid to our executive officers, the
Compensation Committee adheres to long established compensation policies pursuant to
which executive compensation is determined. Base salary determinants include the
prevailing rate of compensation for positions of like responsibility in the particular
geographic area, the level of the executives compensation in relation to our other
executives with the same, more, or less responsibilities, and the tenure of the
individual. To ensure both competitiveness and appropriateness of base salaries, we
retain professional consultants on a periodic basis to update the job classification and
pay scale structure pursuant to which individual executives (and the remainder of our
employees) are classified and the pay ranges with which their jobs are associated.
Bonus.
Bonuses are intended to reward both overall corporate performance and an
individuals participation in attaining such performance. From time to time,
bonuses are also awarded to augment base salary when a determination has been made that
an executives salary is not competitive in light of the factors discussed above.
Stock
Options. The longer-term component of our executive compensation program consists of
stock options. The options generally permit the option holder to buy the number of
shares of the underlying Common Stock (an option exercise) at a price equal to or
greater than the market price of the Common Stock at the time of grant. Thus, the
options generally gain value only to the extent the stock price exceeds the option
exercise price during the term of the option. Generally, a portion of the options
vest over a period of several years and expire no later than ten years after grant.
Stock options are granted upon the recommendation of management and approval of
the Compensation Committee based upon their subjective evaluation of the appropriate
amount for the level and amount of responsibility of each executive officer.
Compensation
of the Chief Executive Officer
Determination
of our compensation of William F. Miller III, our Chief Executive Officer during
fiscal year 2004, takes into account the factors described above as pertinent to the
remainder of our executives and employees, while also taking into consideration
the proprietary nature of our business and efforts expended in connection with
development of our business strategy and service development activities. The
Compensation Committee more specifically took into account Mr. Millers (i)
success in growing revenues, (ii) success in improving operating income compared to
the prior year and in general, progressively during the year, (iii) achievement of
certain specified financial targets, and (iv) success in leading and
strengthening
22
the executive
team and the operating management teams. The Compensation Committee also took into
account the amount of Mr. Millers compensation relative to chief executive
officers of comparable companies.
Other
Section
162(m) of the Internal Revenue Code prohibits us from deducting any compensation in
excess of $1 million paid to certain of our executive officers, except to the extent
that such compensation is paid pursuant to a shareholder approved plan upon the
attainment of specified performance objectives. The Compensation Committee
believes that tax deductibility is an important factor, but not the sole factor, to be
considered in setting executive compensation policy. Accordingly, the Compensation
Committee generally intends to take such reasonable steps as are required to avoid the
loss of a tax deduction due to Section 162(m), but reserves the right, in appropriate
circumstances, to pay amounts which are not deductible.
COMPENSATION COMMITTEE | |
Richard H.
Stowe, Chairman James T. Kelly William W. Neal |
23
Report of
Audit Committee
In
accordance with its Charter, the Audit Committee of the Board of Directors, among
its other duties, assists the Board in fulfilling its responsibility for
oversight of the quality and integrity of our accounting, auditing, and financial
reporting practices. Prior to March 3, 2004, the Audit and Compliance Committees were
joined as one committee. That committee held one meeting in fiscal year 2004
before the committee was split. After March 3, 2004, the Audit Committee met five
times. The Audit Committee discussed the interim financial information contained
in each quarterly earnings announcement with our Chief Executive Officer and Chief
Financial Officer and independent auditors prior to public release.
In
discharging its oversight responsibility as to the audit process, the Audit
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and us that might bear on the auditors independence
consistent with Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with the auditors any
relationships that may impact their objectivity and independence and satisfied itself
as to the auditors independence. The Audit Committee also discussed with
senior management, including our Chief Financial Officer, and the independent
auditors the quality and adequacy of our internal controls and organization
and responsibilities. The Audit Committee reviewed with both the independent
auditors and our Chief Financial Officer their audit plans, audit scope and
identification of audit risks.
The
Audit Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including those
described in Statement on Auditing Standards No. 61, as amended, Communications
with Audit Committees and, with and without management present, discussed and
reviewed the results of the independent auditors examination of our financial
statements. The Audit Committee has considered whether the provision of nonaudit
services by our independent auditor is compatible with the auditors
independence.
The
Audit Committee reviewed our audited financial statements as of and for the fiscal year
ended December 31, 2004 with management. Management has the responsibility for the
preparation of our financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based
on the above mentioned review and discussions with management and the independent
auditors, the Audit Committee recommended to the Board that our audited financial
statements be included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2004, for filing with the SEC. The Committee also recommended the
reappointment, subject to shareholder approval, of the independent auditors and the
Board concurred in such recommendation.
AUDIT COMMITTEE | |
Randolph G.
Brown, Chairman James T. Kelly Richard H. Stowe |
24
Shareholder
Return Performance Graphs
The
graph presented below provides a comparison between the cumulative total shareholder
return (assuming the reinvestment of dividends) on the Common Stock since October
1999 and The NASDAQ U.S. companies index, The NASDAQ computer and data processing
service companies index, and The NASDAQ health service companies index, over the
same period. The graph assumes the investment of $100 in the Common Stock and in each
of the indices.
Oct-99 | Oct-00 | Dec-00 | Dec-01 | Dec-02 | Dec-03 | Dec-04 | |||||||||||||||||
HMSY | 100 | 35 | 35 | 73 | 84 | 93 | 209 | ||||||||||||||||
Nasdaq US Composite | 100 | 113 | 82 | 65 | 45 | 68 | 74 | ||||||||||||||||
Nasdaq Computer & Data Processing Services Stocks | 100 | 107 | 72 | 58 | 40 | 53 | 58 | ||||||||||||||||
Nasdaq Health Services Stocks | 100 | 141 | 161 | 175 | 150 | 230 | 290 |
25
Certain
Relationships
Galen
D. Powers, a director since 1992, is the Senior Founder of Powers, Pyles,
Sutter & Verville, P.C. (PPSV), a law firm specializing in healthcare and
hospital law, which has provided legal and advisory services to us for many years.
We expect PPSV to continue providing similar services in the future. The annual
fees we have paid to PPSV have not been reportable under applicable SEC rules.
As required by the current listing standards of The NASDAQ National Market, we review
all related party transactions for potential conflict of interest situations on an
ongoing basis and all such transactions must be approved by our Audit Committee.
Other
Business
As
of the date of this Proxy Statement, the Board of Directors knows of no business to
be presented at the Meeting other than as set forth herein. If other matters
properly come before the Meeting, the persons named as proxies will vote on such
matters in their discretion.
Shareholder
Proposals for 2006 Annual Meeting
Any
shareholder proposals intended to be presented at our 2005 Annual Meeting of
Shareholders must be received by the Secretary, HMS Holdings Corp., 401 Park Avenue
South, New York, New York 10016, no later than January 4, 2006 in order to be
considered for inclusion in our Proxy Statement and form of proxy relating to such
meeting. Shareholder communications to the Board of Directors, including any such
communications relating to director nominees, may also be addressed to our Secretary
at that address. The Board believes that no more detailed process for these
communications is appropriate, due to the variety in form, content and timing of these
communications. Our Secretary will forward the substance of meaningful shareholder
communications, including those relating to director candidates, to the Board or the
appropriate committee upon receipt.
Moreover,
with regard to any proposal by a shareholder not seeking to have such proposal
included in the Proxy Statement but seeking to have such proposal considered at
the 2006 Annual Meeting, if such shareholder fails to notify us in the manner set forth
above of such proposal no later than March 20, 2006 then the persons appointed as
proxies may exercise their discretionary voting authority if the proposal is
considered at the 2006 Annual Meeting notwithstanding that shareholders have not
been advised of the proposal in the Proxy Statement for the 2006 Annual Meeting. Any
proposals submitted by shareholders must comply in all respects with (i) the rules
and regulations of the SEC, (ii) the provisions of our certificate of incorporation
and by-laws, and (iii) applicable New York law.
26
Annual Report
Our
2004 Annual Report on Form 10-K is concurrently being mailed to shareholders. The
Annual Report contains our consolidated financial statements and the report thereon of
KPMG LLP, independent certified public accountants.
BY ORDER OF THE BOARD OF DIRECTORS | |
William F.
Miller III Chairman of the Board of Directors |
Dated: May 4,
2005
IT IS IMPORTANT
THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE URGED TO COMPLETE, SIGN,
DATE, AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE
27
(THIS PAGE INTENTIONALLY LEFT BLANK)
Please Mark Here for Address Change or Comments |
o | ||
SEE REVERSE SIDE |
FOR all nominees listed (except as indicated to the contrary) | WITHHOLD AUTHORITY to vote for all nominees listed | FOR | AGAINST | ABSTAIN | |||||
1. | ELECTION OF DIRECTORS: | o | o | 2. | Ratification
of the selection of KPMG LLP as the Companys independent accountants
for the fiscal year ending December 31, 2005. |
o | o | o | |
Nominees:
01. Robert M. Holster, 02. William F. Miller III 03. William W. Neal, 04. Ellen A. Rudnick 05. Richard H. Stowe |
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3. | To transact such other business as may properly come before the meeting or any adjournment thereof. | ||||||||
If
you wish to withhold authority to vote for any individual nominee, write
that nominees name in the space below. |
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Signature _________________________________ Signature _________________________________ Date ______________ |
NOTE:
Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. |
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Ù FOLD AND DETACH HERE Ù |
Vote
by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet
and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet
or telephone vote authorizes the named proxies to vote your shares in the same
manner
as if you marked, signed and returned your proxy card.
http://www.proxyvoting.com/hmsy Use the internet to vote your proxy. Have your proxy card in hand when you access the web site. |
1-866-540-5760 Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. |
Mail Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. |
If you
vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can
view the Annual Report and Proxy Statement
on the Internet at www.hmsholdings.com
HMS HOLDINGS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned
appoints William F. Miller III and Robert M. Holster, and any one of them, as proxies,
to vote all shares of Common Stock of HMS Holdings Corp. (the Company) held of record
by the undersigned as of April 15, 2005, the record date with respect to this
solicitation, at the Annual Meeting of Shareholders of the Company to be held at
401 Park Avenue South, New York, New York 10016 on Friday, June 3, 2005, at 10:00
A.M. and any adjournments thereof, upon the following matters:
THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2 ON THE REVERSE HEREOF. IN THEIR DESCRETION, THE PROXIES ARE ALSO AUTHORIZED
TO VOTE UPON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING. IF ANY NOMINEE
DECLINES OR IS UNABLE TO SERVE AS A DIRECTOR, THEN THE PROXIES SHALL HAVE FULL
DISCRETION TO VOTE FOR ANY OTHER PERSON DESIGNATED BY THE BOARD OF DIRECTORS.
(Continued and to be signed on the reverse side)
Address Change/Comments (Mark the corresponding box on the reverse side) |
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Ù FOLD AND DETACH HERE Ù |
HMS HOLDINGS
CORP.
Annual Meeting of Shareholders
June 3, 2005
401 Park Avenue South
New York, NY 10016